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Question: price discrimination 3 points a ski resort caters to both...

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Price Discrimination (3 points)

A ski resort caters to both out-of-town skiers and local skiers. The demand for lift tickets for each market segment is independent of the other market segment. The marginal cost of servicing a skier of either type is $40. The demand formulas for the two market segments are:

Out-of-towners: Qo=1000-5P

Locals:    QL=1000-10P

(a) Assume that the resort charges one price to all skiers. What is the total demand formula? What is the profit-maximizing price? How many tickets will be sold to each group? What are the total revenue, total cost, and profit from the two combined markets? Show all calculations.

(b) Assume that the resort charges a different price to locals than it does to out-of-town skiers. What is the profit-maximizing price for each group of consumers? How many tickets will be sold to each group? What is the combined profit with price discrimination? Show all calculations.

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